Tesla Takes Direct Sales Message To The People At Party Conventions

The electric car company Tesla is novel in many ways. It’s a new company trying to sell a new vision of the automobile, and it sells its cars in a different way: directly to consumers, not through a dealership. But in Texas, state law prohibits car companies from selling cars directly. Customers have to go through an independent dealership instead. For three years, Tesla has been trying without success to change that by lobbying Austin. Now it's lobbying party activists.

At the Texas Republican Party convention in Dallas last month, the exhibitors’ hall had all the usual booths promoting conservative causes and candidates. Smack dab in the middle was something less usual: A cherry red Tesla Model S.

Tesla Fort Worth store coordinator Jesi Hoolihan ticks off the attributes of the $70,000 car: the huge flat screen console in the dashboard, the roomy interior, the way the car plays music when you open the car door.

Detailing a car’s features is about all Tesla employees can do in Texas, even in their own show rooms. They can’t actually sell the cars or negotiate pricing. If a would-be customer wants to take a Tesla out for a test drive in Texas, a special permit is required .

“You can’t go into a Tesla show room, drive the car and say 'Man, I want that, give me the paperwork,'” says David White, a lobbyist for Tesla in Austin. "You have to go online or call California and get it shipped to you."

Texas is one of a handful of states that limits car sales to independent dealerships. For Tesla, those dealerships are unnecessary middle men. The company wants to cut them out and sell cars directly to consumers.

“So if you want to buy a Ford from Ford, or a Tesla from Tesla, you should be able to do that,” White says. “Or if you choose, you can go to a dealer if you want to do that. But right now the consumer does not have that option in Texas.”

White brought that bright red Model S to the convention in an effort to get a plank added to the state GOP’s platform supporting the right of Texans to buy cars directly from manufacturers. Think of it as effectively lobbying the Republican base.

The plank passed overwhelmingly. White says he was not surprised by that.

“We preach Texas is wide open for business,” White says. “So if that is the case, we need to end frivolous regulations that prevent consumers from buying direct.”

But if you step into Don Herring Mitsubishi in Plano, you’ll get a different take on dealer franchise laws. Herring sits on the board of the Texas Auto Dealers Association.

Herring says his three dealerships have to compete with others on price and service, and that’s good for consumers. Texas has been protecting independent auto dealers since the 1950s, and he says that’s created the chance for local entrepreneurs like him to build successful small businesses.

“I’m not saying I want to overregulate business, but I’m saying we want to keep regulations in place that allow for opportunity so that the next generation of entrepreneurs will be able to go out and open small businesses,” Herring says.

The issue for him is less about Tesla, and more about how the auto industry works in Texas. Allowing direct sales, he says, means dealers like him could end up competing with the manufacturers they depend on. That would put them at a disadvantage, and upend what he sees as an even playing field.

“It’s not just going to hurt my hundred employees, or those that are working in other car dealerships,” Herring says. “It’s not just going to put downward pressure on the auto business the way we had saw downward wage pressure with Walmart coming in. But you’re also going to have less people giving back to the community.”

Over the last three years, Tesla has spent as much as two and a half million dollars on dozens of lobbyists in Austin working for the right to sell its cars the way it wants to. So far, though, the company has ended up with little to show for it. Bills proposed to exempt Tesla from the dealer franchise law have gone nowhere.

University of Houston political scientist Brandon Rottinghaus says changing the status quo is always an uphill battle, especially when the status quo benefits a well-financed, well-connected industry.

"Auto dealerships are everywhere, and every member has a dealership in their district. And so these are people who have local ties, they employ people who work and live in the district and there is a more local connection to legislators who don’t want to see those kinds of things change."

Rottinghaus says going to the Texas GOP convention to lobby the Republican base is a savvy move after traditional lobbying hasn’t worked. He says Teslas are a pretty niche product – electric vehicles affordable only to a small number of people – but equating Tesla’s sales approach with many Republicans’ opposition to government intervention could make opposing dealer franchise laws something of a litmus test for supporting a free market.

“There are fewer forms of pure lobbying than when voters are pushing for an issue,” Rottinghaus says. “So if Tesla can gain traction getting the grassroots activated and supporting these policy changes, then it looks more organic than it otherwise might if it’s policy changes because someone donated to someone’s campaign.”

This week, Tesla will be at the Texas Democratic Convention in San Antonio, to make their case to the people. In January, they’ll push for legislation in Austin to change the way cars are sold in the Lone Star State.

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